Welcome to my September update for my Green Dot Portfolio, a small self-managed retirement portfolio created in a Roth IRA trading account. My goal is to yield a total realized return of at least 8% annually in cash income using high-yield dividend investments and swing trading.
Two months ago I surpassed my annual goal that I set in November 2017. In September I added $818 in income, bringing my 11 month total cash return to >$11,000 (+11.11%). As in August, I was involved with other projects this month and spent less time following the markets and doing swing trading.
The major market indexes ended the month of September with little to no gains. The S&P 500 (using the SPDR S&P 500 ETF (SPY)) gained only 0.14%, the Dow (using the SPDR Dow Industrial Index ETF (DIA)) gained the most at 1.75%, the Nasdaq 100 (using the index NDX) lost -0.35%, and the Nasdaq Composite (using the COMP) declined -0.78%. But more importantly, the 2 indexes that many traders associate with healthy market action, the Financials and the small caps, both lost ground. The IShares Russell 200 ETF (IWM) declined -3.88%, and the Select Sector SPDR Financials ETF (XLF) ended September -2.65%. The XLF made a new intra-day high on 9/20 at $29.07 but then declined fairly sharply for the last 6 days of the month.
Readers of my monthly portfolio updates and weekly blogs know that I use the SPDR S&P 500 ETF (SPY) - the traders index - to visualize the underlying stock market pattern. This is important because it influences my decisions on when to buy and sell positions in my portfolio and to make swing trades, as many equities move to a degree with the overall market.
The daily chart of the SPY below for the past 9 months shows how the market took about 5 months to recover from the 2 month drop in early 2018. At several junctures along the way, the market paused and lost ground at key Fibonacci retracement levels. But having fully retraced the early 2018 decline by late August, the SPY has continued to trade within the price channel (gold lines) that I outlined several months ago. For the past 3 months, the SPY has traded above the 20 period moving average (blue line), but if the SPY fails to hold support here and confirms below that line, it may suggest that a trend reversal is underway.
(Source: Chart created by author from TD Ameritrade 'thinkorswim' platform).
Readers of my blogs know that I often check the SPY price pattern analysis by Caldaro (Objective Elliott Wave). In his latest commentary, Caldaro states that "a bull market high may occur in the next few weeks/months." He further suggest that "After that we are expecting a short-lived, and moderate, bear market to unfold." I am by no means rushing to the exits with my portfolio, but I think that it is prudent to trim positions that have yielded above-average profits, especially if held for relatively short periods.
I will continue to monitor not only the SPY for holding support as described above but also the IWM and XLF for signs of continuing weakness.
Last month I described in detail how my Green Dot portfolio has changed since I introduced it in November 2017. Because I made relatively few changes this month, the overall portfolio composition has not changed significantly. Rather than repeat the information about asset allocation in the portfolio, I refer new readers to my August update article.
This section describes the continuing process of consolidating positions in my portfolio, including unloading poor performers, taking some profits on gains, adding shares to holdings, and adding new holdings. In September I took profits on partial positions in 1 REIT and 1 stock, and I added to 2 existing CEFs.
Sells:
Added to Positions:
Total monthly income from dividends in September dipped to $486 due to fewer REITs in the portfolio. I have collected >$6,000 in dividends since I started purchasing portfolio positions in August 2017. Average monthly dividend income (blue line below) has been about level for the past 3 months and is now $524 (v. $528 by August) since Green Dot was introduced in November, and averages $562 for 2018. Dividend income allows me to continue adding to existing positions and to add new holdings to my portfolio.
(Source: Chart created by author from portfolio data as of September 29.)
In September, only 1 REIT paid a dividend, so CEFs contributed 92% of total dividend income. At this time, the 21 CEFs in my portfolio have an unweighted average distribution yield of 8.0%. Of those, 18 pay distributions on a monthly basis.
All dividends have been added to my cash account. In lieu of automatic dividend reinvestment, I target purchases for holdings that are trading at lower share prices.
September was another relatively slow month for swing trading primarily because I was away from the markets a lot, as in August. I nevertheless opened and closed 3 option premium swing trades for profits, dumped 1 losing option trade, and initiated 2 other option trades. I also initiated 1 new ETF swing trade.
For those new to my monthly updates, I provide detailed information, charts, and my trade logs for swing trades in my weekly blogs for followers. In May I detailed my simple approach to swing trading just the option premiums on stocks in this article.
1. New Stock Swing Trades Opened
2. Closed Option Premium Swing Trades
On 9/13, I "sold to close" my 14 AMD Nov 16 2018 19 Puts at $0.17/contract for a net loss of -68.7%. The Advanced Micro Devices (AMD) trade was not a bad one technically at the time, as it was taken on the day of a classic reversal candle with heavy volume (8/27). The stock was also very over-extended on a weekly chart. I followed the lead of others who traded this successfully in the past, but this time the change in trend didn't happen on cue and they were stopped out, at which time I decided to dump the option. As of 9/28, AMD is now down nearly 10% from its high on 9/13, but it's holding support at the 20 day moving average.
3. New Option Premium Swing Trades
Overall, I have been fortunate to close 41 consecutive winning non-option swing trades. Readers can refer to previous monthly updates for details about the stocks that I've traded previously. I've realized a total cash return (price gains and dividends on swings) of >$2,850 on the >$39,670 that I've deployed for swing trades, resulting in a total gain of +7.2% for an average of 42 trading days (+42.95% annualized). The chart below shows the percentage gains for my stock swing trades.
(Source: Chart created by author from portfolio data as of September 28.)
Since April, I have closed 20 out of 24 option premium swing trades for gains, adding >$2,960 in cash to my portfolio for the $7,575 deployed for those winners, or about 39%. Obviously, the losing trades did not add any cash to my portfolio and, overall, the percentage losses were higher than for my winning trades. As longer-term readers know, Green Dot is not a fixed investment portfolio, so I am not calculating net change but rather total cash added. The losses are, however, an opportunity cost in that I have fewer profits to re-invest in other swing trades or fixed income positions.
I am not a sophisticated option trader by any means and I rely on technical chart set-ups for taking option trades just as I would for non-option swings. But there are differences that need attention with my approach, such as the timing to expiration with options, that do not exist for non-option swings. My approach relies on relatively short-term price reversals, and my best trades play out within a few days to a week or two.
The chart below presents the percentage gains/losses for my option premium swing trades.
(Source: Chart created by author from portfolio data as of September 28.)
My Green Dot portfolio generates cash income each month through dividends and profits from swing trades. These are realized gains, or cash that is available for additional investment. My portfolio goal is an 8%+ annualized gain. I continue to use November as the tracking origin, which excludes the 5 swing trades ($394 in profits plus $11 in dividends) in September-October when the portfolio was actively under accumulation.
The table below shows the total investment and investment return in my portfolio each month, including total profits from swing trades (ex-dividends), dividends on swings, and other dividends collected. Dividends are reported for the month received in my account.
Month | $ Cost | $ Swing Profits | $ Divs on Swings | $ Other Dividends | $ Total Income | % Return on Investment |
Nov17 | 79,154 | 509 | 71 | 235 | 814 | 1.03% |
Dec17 | 79,587 | 445 | 48 | 353 | 846 | 1.06% |
Jan18 | 94,560 | 548 | 37 | 509 | 1,094 | 1.16% |
Feb18 | 98,637 | 160 | - | 473 | 632 | 0.64% |
Mar18 | 95,878 | 154 | 5 | 497 | 656 | 0.68% |
Apr18 | 100,656 | 64 | - | 598 | 662 | 0.66% |
May18 | 104,638 | 1,026 | - | 612 | 1,638 | 1.57% |
Jun18 | 105,394 | 1,068 | 44 | 542 | 1,654 | 1.57% |
Jul18 | 111,532 | 753 | - | 707 | 1,460 | 1.31% |
Aug18 | 108,951 | 134 | 14 | 597 | 746 | 0.68% |
Sep18 | 109,258 | 332 | - | 486 | 818 | 0.75% |
Total | 5,191 | 218 | 5,609 | 11,019 | 11.11% |
As presented in the table, total portfolio return in September was higher than in August but still trailed the May to July period.
The 11 month total cash return is now +11.11%, exceeding my annual goal of at least 8%. The chart below shows total monthly percentage return on portfolio cost at the end of each month. The heavy blue line below is the average monthly percentage return, which is now +1.01%. This is down very slightly from August (+1.04%), which I reported erroneously last month as +0.94%.
(Source: Chart created by author from portfolio data as of September 28.)
I continue to expect that dividend income will remain high as I have added significantly to existing CEF positions. I also hope to continue to make at least a modest income from swing trades. Getting the overall market direction correctly can especially enhance option premium swing results.
The chart below depicts the monthly source of realized cash portfolio profits. Overall, the chart clearly shows that my portfolio cash returns have been achieved through both high-yield income investments and swing trading.
(Source: Chart created by author using portfolio data as of September 28.)
I realize that my Green Dot portfolio is a relatively small dollar investment. I enjoy trading and have an active trader discount with my on-line broker (I also trade outside of this portfolio). Every month I get a comment about how this is too much work for too little return. I'm not a trading service and others can do whatever they find works for them, as there are many paths to success. Rather, this is just one real-time example, with actual trades and costs, that shows how a small investor might invest for a reasonable profit. It's mostly not buy-and-hold wherein an investor's fortune often rises and falls with the markets while returning only a few percent in dividends. As I have said, this portfolio is working to collect real cash income. My hat is off to the many others who are doing better, and I only suggest that they share their approach with readers in lieu of posting non-constructive comments.
Over recent months, the performance of my portfolio generally improved along with the general market recovery from the early 2018 sell-off. In September, the total unrealized market value of my 31 non-swing trade positions was -5.62% compared to -4.7% for August. This is due to both the recent pullback in the overall markets and to the fact that I tend to sweep short-term, above-average profits to cash. As a result, the unrealized value of my portfolio may not improve significantly over time. The current unrealized loss is higher, at -8.2%, when including open (non-option) swing trade positions.
As in past months, Colony Capital (CLNY), Macquarie Infrastructure (MIC), and General Electric (GE) continue to account for the majority of my total unrealized losses. I still have expectation that MIC will recover in time.
On the brighter side, many positions in the portfolio are doing fine. Outside of 3 emerging market CEFs (EMD, FAX, FEO), my other 18 CEFs, which have an unweighted distribution yield of +7.68% and which comprise 68% of the portfolio, are down only -1.9%.
As I have said before, I continue to manage the portfolio to reduce losses, and I am aware that these open positions are unrealized or "paper" gains and losses at this time.
Below is a summary table of the 37 non-option holdings in my Green Dot Portfolio as of September 28. Full names of holdings as of mid-November 2017 were included in my Part 2 article introducing the portfolio, and new additions have been described in my weekly position update blogs.
At this time, no single position comprises greater than 8.5% of the total portfolio investment. Excluding option and stock swing positions, the average unweighted dividend/distribution yield of the portfolio is 7.39%.
Symbol | Qty. | $ Unit Cost | Cls. 9/28 | % Div. Yield | % of Portfolio |
Preferreds | |||||
PFXF | 84 | 20.149 | 19.42 | 5.92% | 1.6% |
REITs | |||||
BXMT | 55 | 31.493 | 33.51 | 7.40% | 1.6% |
CLNY | 345 | 11.785 | 6.09 | 7.22% | 3.8% |
EPR | 36 | 67.422 | 68.41 | 6.31% | 2.3% |
HASI | 33 | 18.310 | 21.47 | 6.14% | 0.6% |
SKT | 125 | 26.052 | 22.88 | 6.11% | 3.0% |
VTR | 20 | 58.435 | 54.38 | 5.81% | 1.1% |
CEFs | |||||
AWF | 735 | 12.001 | 11.65 | 7.21% | 8.3% |
BGX | 110 | 15.870 | 16.00 | 7.75% | 1.6% |
DFP | 200 | 23.911 | 23.20 | 7.67% | 4.5% |
DSL | 445 | 20.347 | 20.20 | 8.91% | 8.5% |
EMD | 50 | 15.770 | 13.42 | 8.94% | 0.7% |
FAX | 1,000 | 4.956 | 4.14 | 10.14% | 4.6% |
FEO | 50 | 17.084 | 13.03 | 10.74% | 0.8% |
FLC | 130 | 20.507 | 18.62 | 7.67% | 2.5% |
FRA | 240 | 14.078 | 13.79 | 5.58% | 3.2% |
HPS | 100 | 18.341 | 18.65 | 7.88% | 1.7% |
HYT | 230 | 10.561 | 10.51 | 8.18% | 2.3% |
JPS | 948 | 9.485 | 8.80 | 7.61% | 8.4% |
KIO | 150 | 16.284 | 16.41 | 9.14% | 2.3% |
LDP | 80 | 25.215 | 23.81 | 7.85% | 1.9% |
MSD | 400 | 9.523 | 8.67 | 6.45% | 3.6% |
NVG | 249 | 15.236 | 14.56 | 5.42% | 3.5% |
RA | 270 | 22.994 | 23.06 | 10.36% | 5.8% |
RNP | 50 | 19.900 | 19.53 | 7.62% | 0.9% |
RQI | 175 | 11.829 | 12.25 | 7.83% | 1.9% |
UTF | 240 | 21.931 | 22.13 | 8.40% | 4.9% |
UTG | 85 | 29.479 | 30.66 | 6.65% | 2.3% |
Income Stocks | |||||
D | 15 | 80.194 | 70.28 | 4.75% | 1.1% |
MIC | 33 | 69.741 | 46.13 | 8.67% | 2.2% |
SYF | 40 | 28.950 | 31.08 | 2.70% | 1.1% |
Swing Trade Holdings | |||||
GE | 103 | 23.922 | 11.29 | 4.25% | 2.3% |
KHC | 9 | 80.994 | 55.11 | 4.53% | 0.7% |
SCO | 70 | 14.800 | 13.50 | -- | 1.0% |
TZA | 125 | 7.950 | 8.41 | 0.59% | 0.9% |
UGLD | 160 | 10.555 | 7.86 | -- | 1.6% |
USLV | 125 | 7.930 | 6.53 | -- | 0.9% |
(Source: Created by author from portfolio data as of September 28.)
The SPY closed out 2017 at $266.86 and closed September at $290.72, a gain of +8.94%. Not that I am necessarily using the SPY as a benchmark for my Green Dot portfolio, but from January to September my portfolio has slightly outperformed the SPY, at +9.02%. If I had just bought the SPY index and that corrects soon, unless all gains were cash income, those paper gains will be reduced. As I have already captured my gains as cash, any decline in the markets will not reduce the profits that I have collected.
I consider that any success to date with my Green Dot portfolio has resulted from combining cash income from high-yield CEFs and REITs, purchased incrementally at market dips, and extra income from swing trades. I will continue to rely on this strategy regardless of what the market brings. I have surpassed my minimum annual goal of +8% on investment and hope to continue to add cash income each month going forward.
Author's note: I appreciate the comments and questions from readers in the Seeking Alpha community, and I look forward to continuing to share my investing experience and to learn from others.
If you found this article of interest and want to read more about my Green Dot Portfolio and my dynamic income and swing trading approach to investing, please click the "follow" button at the top of this page. Please share this with others who you think would be interested.
Best to your investing/trading!
=Green Dot Investor=
This article was written by
Disclosure: I am/we are long AWF, BGX, BXMT, CLNY, D, DFP, DSL, EMD, EPR, FAX, FEO, FLC, FRA, GE, HASI, HPS, HYT, JPS, KHC, KIO, LDP, MIC, MSD, NVG, PFXF, RA, RNP, RQI, SCO, SYF, SKT, TZA, UGLD, USLV, UTF, UTG, VTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I also have open option premium swing trade positions in AAPL, CSX, F, HD, and LOW.